What happened
SelectQuote (SLQT 2.89%) had another good week as the stock price climbed 14.7% higher from last Friday's close through 10:35 a.m. ET on Feb. 17, according to S&P Global Market Intelligence. The penny stock is trading at about $2.23 per share and is up a whopping 232% year to date as of this morning.
It once again beat the markets as the S&P 500 and the Dow Jones Industrial Average were both down 0.5%, while the Nasdaq Composite was up just 0.4% this week.
So what
SelectQuote has been good to investors this year, as it is up some 232% year to date, with a good chunk of that coming last week following the release of its fiscal second-quarter earnings report. The stock surged roughly 118.8% higher last week on a report that saw a 64% year-over-year increase in revenue and crushed earnings expectations with net income of $22 million, or $0.14 per share, up from a net loss a year ago this quarter.
The online insurance marketplace also revised its revenue and earnings guidance upward, which boosted investor confidence.
NYSE: SLQT
Key Data Points
This week, the gain was likely due to the January inflation numbers, released on Tuesday. The report was not great overall, as the Consumer Price Index (CPI) ticked up 0.5% in January and is up 6.4% from the previous January, which was higher than expected. But for SelectQuote and other insurers, it was positive news as the price of motor vehicle insurance was one of the biggest gainers, up 1.4% in the month.
Insurance is among the relatively few industries that perform well in times of high inflation, because it is an essential need and insurers can generally hike prices to keep up with rising costs, as last month's CPI showed.
Now what
Insurance stocks are not a bad place to be in this current environment, as they will not only benefit from price increases, but their investment income should be higher due to elevated interest rates.
Reflecting that, SelectQuote increased its revenue and earnings guidance at the midpoint of its fiscal year with revenue projections of $910 million to $960 million, up from $850 million to $950 million. The net loss is expected to be between $94 million and $78 million, up from a range of $113 million to $89 million. In addition, the adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) projection was hiked to a range of $5 million to 25 million, up from a range of negative $20 million to $10 million.
While the returns this year are impressive, keep in mind this is a penny stock and they are far more prone to wild swings, so you can probably expect more volatility to come.
